Sirius: RBC Urges Investors to Remain on Sidelines Following Latest Earnings 44 comments
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David Bank, an analyst from RBC Capital, issued a report which discussed the recent operating results published by Sirius XM Radio (SIRI). The company has a conference call scheduled for Tuesday, March 17th, 2009.
REPORT EXCERPTS
4Q08 Revenue And EBITDA Beat, But Subs Miss By A Wide Margin; Guidance Withdrawn
Bank noted that Revenue And EBITDA Beat expectations, but also pointed to the subscriber numbers which he characterized as dismal. The analyst also noted some concern over the company guidance which he states were withdrawn, and that is an indicator of a tough operating environment.
Bank noted that Revenue beat the street because of increased ARPU, a metric that he attributes to some customers electing to pay for higher priced packages from the new tiered offerings (including the “best of” package), as well as better and earlier than expected realization of cost synergies, especially in sales and marketing. As a function of this, Sirius XM was able to post positive EBITDA.
The analyst noted that net subscriber additions about 83,000 fell well short of the 180,000 they were anticipating. Bank noted that indicating a tough auto and retail environment were contributing factors.
From an operating and cash standpoint Bank sees deal with Liberty Media and the release of $140mm from the MLB/NASCAR escrow accounts as events that should provide the company with ample capital to address all 2009 debt refinancing obligations. However, RBC sees the continued deterioration in the auto/consumer channels as reason to remain on the sidelines. RBC maintains a Sector Perform rating and has not assigned a price target.
Items of Note:
- 500K customers were on a tiered offering at YE2008, the vast majority of which are paying a higher price than the standard $12.99, leading to increased ARPU. Bank believes that management’s confidence in attaining adjusted EBITDA of $300mm+ in FY2009 implies continued improvement in ARPU from customer conversion to higher priced packages, and realization of cost synergies.
- RBC expects 388,000 net subscriber additions in FY2009 (vs. prior 1,500K estimate)
- RBC expects revenue of $2.6bn (vs. prior $2.7bn), with their FY2009 adjusted EBITDA estimate unchanged at $303mm.
Position: Long Sirius XM Radio
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This article has 44 comments:
“There has been a huge growth in terrestrial alternatives,” Rothblatt told Fortune. “As we move from third-generation to fourth-generation cellular, there’s going to be ever more bandwidth available to distribute content totally via terrestrial cellular infrastructure. And that will leave fewer and fewer unique market attributes to satellite radio. Technologies have their ideal times and places, and in my opinion the better time for satellite radio was 10 years ago.”
Terrific rally, but the patient is terminal.
CEO Mel gave us someone always has to report ugly unwanted news
regarding the company? I am speaking of the former founder of the company who when he founded it was a male and now is a female.
I think all holders of SIRUS/XM stock should tell her to now get lost that she is history.
On Mar 17 08:39 AM I'm not Jim Cramer wrote:
> Tyler, there's a great chance to recoup your investment in Sirius
> right now. It's a traders market and hopefully that's exactly what
> all shareholders should be doing. Longterm, bye bye Sirius. Forgive
> me for using a quote on more than one thread. This comes from Martine
> (formerly known as Martin) Rothblatt, one of the founders of Sirius:
>
>
> “There has been a huge growth in terrestrial alternatives,” Rothblatt
> told Fortune. “As we move from third-generation to fourth-generation
> cellular, there’s going to be ever more bandwidth available to distribute
> content totally via terrestrial cellular infrastructure. And that
> will leave fewer and fewer unique market attributes to satellite
> radio. Technologies have their ideal times and places, and in my
> opinion the better time for satellite radio was 10 years ago.”<br/>
>
> Terrific rally, but the patient is terminal.
>
Additonally, the threat of 3G and 4G and broadband is a muted argument. I can't name one state that has 100% seamless broadband (wireless) coverage or will have in the next three years.
Seamless coverage is what is required. 3g,4g and broadband are a long long way off.
My iPhone plays internet radio 'seamlessly' in my car (and at home/office) at all times where I live and spend 95% of my time. 50,000+ stations plus Pandora/lastFM plus my library... in one unit that works everywhere.
On Mar 17 10:00 AM User 370866 wrote:
> Additonally, the threat of 3G and 4G and broadband is a muted argument.
> I can't name one state that has 100% seamless broadband (wireless)
> coverage or will have in the next three years.
>
> Seamless coverage is what is required. 3g,4g and broadband are a
> long long way off.
I would like to see some of them compare Sirus to some of the other companies out there, name 6 that have done better than Sirus in these times> Name 6 that can match Sirus. Cramer is also an idiot who's program rates right up there and comes across right up there with Howdy doody and Mr Dress-up. It is a shame that a bunch of high school kids with some form of a secondary degree are left to report on and influence the market on such companies as Sirus. You aside Tyler, you have seemed to always keep an open mind what is the matter with the rest of them. By the way what was Banks take on AIG, Leaman Brothers 6 months or a year ago?? What about the rest of the "anal'ysts that suckered every one into the sub prime investments. What do they have to say today "opps" Should we be listening to these idiots, I don't think so. I am happy to be Sirus stock holder, I am angry at the media, and the high school yuppies that are now calling the shots.not Mel.
Just look at his track record.
Don't forget churn. Churn was up .01% from 3rd quarter of 08, this is a representation of roughly 2500 customers. Also churn as indicated by the motley fool, had indicated that churn is only accounted for by payed accounts, not by those that get a service package (3 months or more free). This may be that down the road those that do acquire and pay for service may cancel months to a year later which would only increase churn, if subscriber acquisitions do not rise at a faster rate.
The adjustments in the revenue stream starting in march is going to adjust to alot of the churn losses, and the subscriber loss/slowdown. So when the subscriber numbers plateau, there will still be an increase in the revenue from sales from the internet, and the best of package, not to mention the $2 adjusted fee to family plan subscriptions.
This stock is going to hold at between .25 and .27 as i mention previously last week.
Rothblatts opinion means nothing to what sirius truly does in this competitive market place. Although Pandora is probably one of the few free for radio internet services. It will soon have to pay big dollars to the music industry just as sirius/xm does. Also Pandora is old music content, sirius is new and old music content, and both are genre specific. I think hands down sirus is eventually going to win the battle over internet content just simply because the music variety that sirius has is payed for. The music industry i staking pandora to court over copyright content and I believe Pandora will lose.
On Mar 17 11:13 AM BigVinnie wrote:
> Tyler,
> Don't forget churn. Churn was up .01% from 3rd quarter of 08, this
> is a representation of roughly 2500 customers.
I bought 80,000 @ .12. Doubt thought that was a good idea either.
Just sit and wait till the train leaves the station then try and jump on it while it's moving. No thanks.
However, if I recall correctly. There are subscriptions associated with data. Now do you pay through the nose like you and I on the iphone, or, do you get your SIRI subscription paid. Not everyone can choose both.
PS. Can truckers not own iPhones too then?
On Mar 17 10:34 AM jswede wrote:
> "seamless coverage" is what's required for truckers driving across
> the country -- not for the other 99.5% of the population.
>
> My iPhone plays internet radio 'seamlessly' in my car (and at home/office)
> at all times where I live and spend 95% of my time. 50,000+ stations
> plus Pandora/lastFM plus my library... in one unit that works everywhere.
>
The important thing w\SIRI is unique, original content which can be delivered seamlessly. As long as they have a lock on that and can get paid for it they have a business model. Delivery method isn't as important - satellite, internet or iPhone; in fact I think it only helps that it's available more widely, lower price and increase volume. Don't forget the analog TV spectrum soon to be available, nobody is really talking about it now but it's going to have a big impact.
Short to medium term I worry about debt issues (drop dead payment dates, paying interest expense), for now it seems to have been deferred. I think their cash flow is a great asset, it's been overlooked because of the problems with debt.
Buy Buy Buy
Oh thats the mark of the beast you invested there $ 6666.66 x 80,000= .12 / per share
On Mar 17 11:19 AM DBLOCK wrote:
> Ask RBC if it's high enough to buy yet. lol
> I bought 80,000 @ .12. Doubt thought that was a good idea either.
>
> Just sit and wait till the train leaves the station then try and
> jump on it while it's moving. No thanks.
So peshu if your forcast changes make sure to let us know.
On Mar 17 04:25 PM User 368014 wrote:
>
> Oh thats the mark of the beast you invested there $ 6666.66 x 80,000=
> .12 / per share
>
> On Mar 17 11:19 AM DBLOCK wrote:
On Mar 17 03:40 PM I'm Not Jim Cramer wrote:
> Great day for all traders! Enjoy your success you've earned it especially
> if you had the guts to buy in below ten cents. Just don't think it's
> forever that's all. I would compare it to spending a great vacation
> in the Carribbean with a person of the opposite sex. Doesn't mean
> it's marriage time though and always have one eye on the appropriate
> door!
On Mar 18 01:01 AM I'm Not Jim Cramer wrote:
> Holmes: Differ with you on a couple of counts. First, they weren't
> close to profitability before the merger, or there would have been
> no reason to do so. Don't be fooled by the EBITDA numbers. They are
> further away from profit now not closer. They have ended potential
> delinquency on the loans, but the actual cost to them from doing
> so is increased not decreased because of the outrageous interest
> rate they had to pay. The real x-factor in this is what happens to
> the auto business. Since Sirius has made little inroads outside the
> auto market, eveything depends on what happens to GM and Chrysler
> in the short run. Actually, content is contracting, not exploding
> as we saw a few months ago when the cancellation of several channels
> provoked short term listener outrage. The other crucial profitability
> issue for Sirius is the new negotiations for sports programming,
> and how to dump big name yet small listener draws like Oprah. Yes,
> even Howard will fall into that category in the next couple of years.
> His demographics are declining not expanding. Just something to think
> about.
The article indicates the number of subscriptions was lower than expected--------not surprising-------it's just now becoming spring and summer when people will be looking at the new offerings in autos which is a big part of Sirius market.
What will happen with Sirius I do not know-----one thing I do know is what a great market technician told me-----you buy when there is blood in the streets (figuratively speaking) ----------long term investors have been bloodied in this stock and numerous other stocks.
IMHO a lot of people have an unknown interest in bashing Sirius/XM-------the former founder, how many years ago?, obviously has a reason to not support the company as indicated in his/her article.
Personally I'll bet on Mel and Malone.